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No President Obama, It Was Private Business That Made Our Roads And Bridges Possible

"Private business came first, then roads and bridges."(Photo credit: Wikipedia)

Without big government, President Obama likes to suggest, we would all be poor, miserable creatures. For starters, he claims that business became possible only because government built roads and bridges.

Actually, Obama has it backwards. Private business came first, then roads and bridges.

They weren’t originally developed by governments. They were developed by merchants who began establishing trade routes thousands of years ago. In the beginning, before the first Department of Public Works, there were innumerable trails.

Developing trails required that somebody travel, and kings generally didn’t travel unless they were conquering new territory. If they left their territory for an extended period, they would probably have returned to find somebody else ruling the territory that used to be theirs. So it was merchants, hoping to make money, who blazed the trails for regional and long distance trade. At their own expense, merchants determined the most worthwhile places to go and the most efficient ways of getting there.

Europe’s first great civilizations arose from private trade. Starting perhaps around 7000 B.C.E., a resourceful maritime people who became known as Minoans established themselves in Crete. They were ancient history to Homer. They brought copper from Cyprus, tin from Asia Minor, elephant Tusks from Syria and diorite from the Nile Valley – and Minoan pottery made its way to Egypt.

The ancient origin of private markets and trade routes is most dramatically evident in prehistoric trade goods such as obsidian, a brittle volcanic glass that can be chipped into knife blades, mirrors and other implements. Valued for perhaps 30,000 years, obsidian tools have turned up at most early village sites in the Middle East and Mediterranean. Usually such villages were hundreds of miles away from the sources.

How do we know this? During the 1960s, British archaeologists J.E. Dixon, J.R. Cann and Colin Renfrew gathered obsidian samples from extinct volcanoes throughout the Mediterranean and ancient Mideast. Heated to incandescence, each element in the samples emitted a characteristic wavelength of light. The amount of certain trace elements – barium, zirconium and cesium – varied from one volcano to another. By analyzing obsidian samples from ancient settlement sites, Dixon, Cann and Renfrew could determine which volcano they came from. This isn’t the only method of dating obsidian.

Analysis of other commodities confirmed that private trade flourished throughout the ancient world. For example, the remains of many inland Anatolian settlements include seashells from the Aegean as well as amber from the Baltic. Both were valued for jewelry. Copper was used at Ali Kosh, an early farming village in southern Mesopotamia, yet the nearest copper deposits were hundreds of miles away. Pearls from Bahrain, jasper from Armenia, beryl from India and perfume from Egypt have turned up at ancient village sites hundreds of miles away.

Civilization arose not in remote regions but along trade routes where it was convenient for people to gather. Since at least 7000 B.C.E., Jericho was a major commercial center. It was located on a natural trade route between Anatolia, which had obsidian, and Beidha, a village to the south that supplied sea shells and hematite, an iron oxide valued for its red color.

There’s abundant evidence of flourishing trade further east. Archaeologists believe that a light-skinned, dark-haired Sumerian people migrated south from the Caspian Sea about 8500 B.C.E., settling along the delta where the Tigris and the Euphrates empty into the Arabian Gulf. Trade was absolutely vital for civilization there, because the only natural resources were water and mud. Sumerian traders invented sailboats so they could travel long distances. They organized caravans for overland routes.

By the sixth century B.C.E., Greeks began hearing about wonders from the Orient.

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I don’t think this is true, in part because throughout history, governments have spent far more time trying to restrict trade than trying to expand trade. Governments have commonly blocked imports via tariffs, import quotas, import bans, “voluntary” export restraints and antidumping duties. In medieval Europe, guild restrictions severely limited trade. When mercantilism was fashionable, European states tried to monopolize trade with their colonies and prevent colonists from doing business with any of their rivals. One of the first things nations do when they go to war is block their enemies’ trade. Napoleon enforced the “continental system,” a large-scale embargo against British trade. During the Civil War, President Lincoln established a blockade against the Confederacy. During World War I, the British established a blockade against Germany. FDR declared an embargo against shipping steel, scrap steel and petroleum products to Japan. The economist Henry George quipped that protectionists try to do to ourselves in time of peace what our enemies do to us in time of war – namely, block trade. In 1930, the U.S. enacted the Smoot-Hawley tariff that raised tariffs an average of 59 percent on thousands of commodities and manufactured goods. Our friends as well as our enemies retaliated by erecting high barriers against American products. Germany and other countries adopted exchange controls. During World War II, Germany tried to disrupt shipments to Britain with its submarines. Severe economic restrictions continued in Europe for a number of years after the war. “Development economics” influenced economic policy in many Third World countries, a principal policy of which is high tariffs to prevent their people from buying cheaper and better products from abroad. Communist regimes routinely restrict trade and limit contact with the outside world.

Though it was an interesting read, this article has some factual inaccuracies. The author seems to suggest that merchants independently built the Silk Road in an effort to boost their own trade efforts. In reality, the Persian portion of the route was built by King Darius and was extended during Alexander the Great’s conquest for military purposes. The Chinese portion was similarly built by the Han Dynasty with military ambitions initially in mind. So the Silk Road was about as Big Government as it gets.

The author later mentions the Lancaster Toll Road as an example of private enterprise creating roads. He fails to mention that this company went broke and was dissolved.

The author’s failed to provide an example of a sustained land road system that hasn’t been state-sponsored. (Unless the point of this article was that we should abandon all road projects and return to the glory days of shipping exclusively by sea and river.)

My main point is that private business has to create and build up substantial wealth by comparatively simple, inexpensive means BEFORE large, costly infrastructure projects would make sense.

Costly infrastructure in itself doesn’t have magical powers to create commerce and wealth.

If costly infrastructure did have magical powers, then the World Bank would have had a high success rate spending billions of dollars on development projects. Instead, the Independent Evaluation Group reported that an audit of 627 World Bank projects found a failure rate over 40 percent – and over 50 percent in some regions.

America didn’t become wealthy because of costly infrastructure projects such as interstate highways. They came much later, after substantial wealth had been created through less expensive means.

In the article, I already covered the losses incurred by state-run railroads and later the losses incurred when the federal government subsidized the over-expansion of many private railroads.

Similarly, East Asian economies didn’t rebound from World War II with costly government-run heavy industry. They began with less expensive production of textiles, plastic toys and other things.

One might imagine that after all the controversy about Alaska’s Gravina Island Bridge – the infamous “Bridge to Nowhere” – more people would recognize that infrastructure doesn’t have magical powers.

This bridge was originally projected to cost $398 million, even though Gravina Island had only about 50 residents. After the bridge project was cancelled because of protests about government waste, the $25 million Gravina Island Highway was built to the point where the bridge would have been. As CNN reported, the road “curves around, then it just stops.”

You wrote:”America didn’t become wealthy because of costly infrastructure projects such as interstate highways. They came much later, after substantial wealth had been created through less expensive means.”

This is simply not true. Governments built cannals, roads, ports, and even hospitals to promote economic growth. The federal government built the Cumberland Road in 1811 It rand 620 miles (1,000 km) and connected Maryland to Illinois. The Federal government built the Chesapeake and Ohio Canal (a plan which originated in 1754 with George Washington)and initiated by President John Quincy Adams in 1828. US merchants supported and profited from these internal improvements. None of these could have been funded or created with the Federal Government’s efforts.

What is really amusing about your posting is that while you suggest hat there is dark purpose at work in his language, what are we to make of Mr. Romney’s comments at the Salt Lake City Olympics?

ROMNEY: You Olympians, however, know you didn’t get here solely on your own power. For most of you, loving parents, sisters or brothers, encouraged your hopes, coaches guided, communities built venues in order to organize competitions. All Olympians stand on the shoulders of those who lifted them. We’ve already cheered the Olympians, let’s also cheer the parents, coaches, and communities….All Olympians stand on the shoulders of those who lifted them.”

Mr. Romney was expressing the same concept in nearly the same words. Mr. Romney it would seem is agrees with Mr. Obama. Since Gov. Romney is your candidate, why are you disagreeing with him?

I don’t understand why this is even an issue. The simple matter is that businesses in their current form could not exist without the sophisticated infrastructure that we have. Look at other countries without such infrastructure. Do they have businesses, smart entrepreneurs, and some individual wealth? Of course. Is it anything like a modern country with double digit tax rates and well developed civil engineering? Of course not. Please let this die and find something better to talk about, like actually policy.

As we know, President Obama has suggested that entrepreneurs and investors couldn’t function without government roads, and therefore unlimited taxation is warranted.

If he means people should pay taxes for government services they receive, this would seem to imply that government should pay their share of the cost of maintaining roads and bridges.

But the implication is businesses shouldn’t have to pay for government spending unrelated to services they receive. Among such unrelated spending are entitlements, “green” energy projects, farm subsidies, etc.

One might reasonably conclude that if businesses should pay taxes based on government services they receive, THEIR TAXES SHOULD BE CUT until they reach the point of covering the government services they receive – and nothing else.

I’m sure Obama would say that of course, businesses have to pay for all that spending even though it’s unrelated to services for businesses.

But if businesses have to pay for whatever Obama wants to spend money on, why did he bring up roads and bridges?

In essence, his principle is that because businesses receive a service from government, then government has a claim to unlimited taxes. If you think Obama isn’t making a claim for unlimited taxes, I’d appreciate it if you could please let me know what the limit is, because I can’t find it, unless it rolled under my chair.

The point of my story is that businesses blazed the earliest roads which were trails. Many military roads followed these trails, since they led to places worth controlling, like harbors, river junctions and trading centers.

When businesses accumulated wealth, they made it possible to support the costly construction of better roads and bridges. Wealth had to be accumulated before costly infrastructure could be built, otherwise, debt – often an unsustainable amount of debt – would have to be taken on.

The idea that businesses owe their success to government roads and bridges implies that infrastructure is the reason for America’s economic success – a woefully simplistic view of how an economy works.

Infrastructure doesn’t have a magical ability to bring a functional economy into being.

When the World Bank and other institutions have dropped costly infrastructure into poor countries, a lot of it has gone unused, and it deteriorated. There have been many reasons for this. For example, countries tend to stay poor when there are regulatory obstacles preventing people from obtaining a legally secure title to their land and their business. Countries tend to stay poor when there are government-enforced obstacles to education, trade and much else. At any history, there have been many dictators and government-run economies. In such circumstances, costly infrastructure will be unlikely to do any good.

So, businesses must create wealth as inexpensively as possible – probably with dirt roads – before high grade roads and bridges can be built.

This implies not unlimited taxes, as Obama imagines, but rather a policy environment that makes it easy to invest, grow businesses and create private sector jobs.

You did not respond to Jarett Messing’s comment at all. How many modern businesses are thriving in Mogadishu? There are entrepreneurs to be sure, khat importers, cotton processing, hotels, private airlines, and pirates to name a few. There are no “regulatory burdens” since government is non-existent, there are no labor unions, and taxes are zero. It should be an entrepreneur’s haven yet there is little in the way of any modern business making profits (aside the pirates of course).